MWM Investment Newsletter – Spring 2019

Global stock markets regained their poise in the first three months of the year returning just under 10% in Sterling terms, and nearly recouping the losses from the final quarter of 2018.

Global stock markets regained their poise in the first three months of the year returning just under 10% in Sterling terms, and nearly recouping the losses from the final quarter of 2018. These gains were delivered despite continued concerns about economic growth which brought about a fall in sovereign bond yields and caused Gilts to rise by over 3% during the period. The market’s change of mood was largely attributable to the US Federal Reserve’s shift away from raising interest rates, and its indication that it would be “patient” in its approach to monetary policy. Thus it appears we are returning to a situation where interest rates may remain very low by historical standards for the foreseeable future, and with lots of money chasing few attractive investment opportunities (yields on safer assets remain very low) stock markets remain buoyant despite predictions of a forthcoming recession.

Leading indicators of economic growth continue to cast a gloomy shadow over the prospects for equities. Manufacturing Purchasing Managers Indices, which usually serve as a reliable indicator for future growth, fell significantly compared to the same measures from six months previous, and into contraction territory. We do however note that valuations on equity markets are no longer at the elevated levels seen over the last few years, and hence it may be argued that much of the bad news is already priced into markets.

At the time of writing (and most likely at the time of reading too!) the Brexit debacle trundles on towards no apparent resolution. Politics aside, markets do not seem to be in the mood to predict an outcome, with speculation on Sterling subdued, and foreign investors simply choosing to ignore the UK listed market until matters become clearer. The eventual outcome is highly significant in the short term for Sterling based investors, not least because the market is likely to deliver its verdict through its valuation of the Pound.

Our Investment Committee agreed to maintain our cautious stance reflected by our neutral position in equities and overweight position in gold. As Brexit and the value of Sterling continues to be a risk for UK investors, we implemented changes to protect our portfolios against a possible rise in the value of the Pound, and reinstated our exposure to domestically focused UK companies.

I hope you will find this newsletter interesting and relevant to you, and I would very much welcome any feedback you may have. Please do feel free to get in touch with your thoughts either by phone on 0207 063 4259, or by email on david.baker@mazars.co.uk  

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MWM Investment Newsletter – Winter 2019

Rising interest rates, trade wars, and a widespread slowing of economic growth caused markets to take fright in the last quarter of 2018 with global equities falling by 3.3% in Sterling terms.

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